Cross-sectional determinants of an executive performance metric index
Abstract
Purpose
Performance-based executive compensation has been well studied in the academic literature but relatively little attention has been paid to the performance metrics disclosed by corporations in their proxy statements. The paper aims to discuss this issue.
Design/methodology/approach
Using these statements from a large sample of US firms from 1996 to 2005, the author constructs an accounting-based-metric index based on the inclusion or exclusion of performance benchmarks from five categories.
Findings
The author finds firm rely more heavily on accounting-based evaluation when their stock market valuation is low. Larger firms, firms with a high marginal tax rate, and firms with low earnings per share are more likely to use accounting-based pay, levered firms are not more or less likely.
Originality/value
These results are consistent with accounting-based pay being used by firms with fewer intangible assets, smaller unrealized growth options, and more established lines of business.
Keywords
Citation
Robinson, J. (2015), "Cross-sectional determinants of an executive performance metric index", Managerial Finance, Vol. 41 No. 4, pp. 396-404. https://doi.org/10.1108/MF-07-2014-0184
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited